Cite as: Keith M. Lundin, Lundin On Chapter 13, § 157.1, at ¶ ____, LundinOnChapter13.com (last visited __________).
In simple mandatory words, § 1328(a) describes the discharge at the completion of all payments under a Chapter 13 plan:
[U]nless the court approves a written waiver of discharge executed by the debtor after the order for relief under this chapter, the court shall grant the debtor a discharge of all debts provided for by the plan or disallowed under section 502 of this title, except any debt—
(1) provided for under section 1322(b)(5) of this title;
(2) of the kind specified in paragraph (5), (8), or (9) of section 523(a) of this title; or
(3) for restitution, or a criminal fine, included in a sentence on the debtor’s conviction of a crime.1
There are several key phrases in § 1328(a)(8). A “written waiver of discharge executed by the debtor after the order for relief under this chapter” is rarely seen in Chapter 13 practice.2 Waivers of discharge entered before the filing—for example, a waiver in the boilerplate of a loan document—are not effective at discharge in a Chapter 13 case.
All debts “provided for by the plan” are discharged except as stated in the subparagraphs in § 1328(a). “Provided for by the plan” is a phrase of art that, given its ordinary meaning, is broadly inclusive of every debt that is dealt with, referred to or provided for in the Chapter 13 plan.3
Any claim “disallowed under § 502” is discharged at the completion of payments under a Chapter 13 plan unless the debt falls within one of the enumerated exceptions. This means, for example, in Chapter 13 cases filed after October 22, 1994, an untimely filed proof of claim to which an objection is filed is “disallowed under section 502” and is dischargeable at the completion of payments under the plan notwithstanding that the claim holder receives no distribution.4 On the other hand, an untimely filed claim for a student loan might receive no payments through the plan because it is disallowed under § 502(b)(9), but the claim would survive discharge because of the exception in § 1328(a)(2).5
Cody v. Cody (In re Cody)6 is a good illustration. A property settlement agreement was stipulated to be nondischargeable in the debtor’s prior Chapter 7 case. The debtor then filed a Chapter 13 case listing the debt and providing for payment. The debtor’s ex-spouse had notice but failed to timely file a proof of claim. The bankruptcy court held that the property settlement was dischargeable in the Chapter 13 case if the debtor completed payments under the plan notwithstanding that the ex-spouse would receive no payment:
It does not matter that the debt was not discharged in a prior chapter 7 case. Completion of the plan and entry of discharge in the chapter 13 case will discharge all debts provided for in the plan. . . . Having provided for the debt, if the debtor fulfills his obligations under the Bankruptcy Code by completing the plan and obtaining discharge of those “provided for” debts, including the debt here in dispute, the debtor will be discharged of the debts, even those where payments cannot be made by the trustee because the creditor has failed to file a proof of claim.7
The discharge of an individual debtor after completion of all payments under a Chapter 13 plan is the broadest discharge available under the Code. Prior to the 1990 bankruptcy amendments, the only exceptions to the full-payment discharge were alimony, maintenance and support described in 11 U.S.C. § 523(a)(5), claims “not provided for” by the plan, and long-term debts dealt with under § 1322(b)(5).8
In 1990, Congress added three kinds of debt to the exceptions to discharge in a Chapter 13 case after completion of payments: student loans under the circumstances described in § 523(a)(8);9 debts for death or personal injury caused by the debtor’s operation of a motor vehicle while legally intoxicated under § 523(a)(9);10 and restitution included in a sentence on the debtor’s conviction of a crime under § 1328(a)(3).11 The Bankruptcy Reform Act of 1994 added “a criminal fine” included in a sentence on the debtor’s conviction of a crime to the debts that are not dischargeable at completion of payments, but only with respect to Chapter 13 cases filed after October 22, 1994.12
Although it is sometimes said that claims entitled to priority under § 507 and thus to full payment in a Chapter 13 plan under § 1322(a)(2) are “nondischargeable,” more accurately the plan must provide for full payment of such claims to accomplish confirmation.13 If full payment is provided, all claims entitled to priority are dischargeable at the completion of payments in Chapter 13 cases filed before October 22, 1994.
In Chapter 13 cases filed after October 22, 1994, priority claims provided for by the plan are dischargeable at the completion of payments with the exception of debts for alimony, maintenance or support that fit both the description of priority claims in § 507(a)(7) and the description of nondischargeable claims in § 523(a)(5).14 Tax claims for willfully omitted income and for the filing of fraudulent returns that would be nondischargeable in a Chapter 7 case under § 523(a)(1)(C)15 are dischargeable in a Chapter 13 case at the completion of payments under the plan and are not entitled to full payment under § 1322(a)(2) because of the exception to priority in § 507(a)(8)(A)(iii).16
Other than alimony and support (§ 523(a)(5)), student loans (§ 523(a)(8)), drunken driving (§ 523(a)(9)) and restitution or a criminal fine (§ 1328(a)(3)), the long list of exceptions to discharge in § 523(a), applicable in Chapter 7, Chapter 12 and individual Chapter 11 cases, is not applicable in Chapter 13 at completion of all payments. In particular, claims for fraud, misrepresentation, willful and malicious misconduct and defalcation in a fiduciary capacity—the so-called “fraud exceptions” to discharge given special treatment in § 523(c)—are dischargeable after completion of payments in a Chapter 13 case.17 Subject, of course, to the limits on confirmation of a plan, even claims declared nondischargeable in a prior Chapter 7 case are dischargeable after completion of all payments in a Chapter 13 case.18 It has been said that plaintiffs are “probably wasting their time and money” to pursue a dischargeability complaint against a Chapter 7 debtor who is eligible for Chapter 13, “since if the debtor loses the dischargeability suit, he is almost certain to convert the Chapter 7 to Chapter 13 so as to discharge the debt.”19 There is some disagreement whether a Chapter 13 debtor in a case filed after October 1, 1979, can discharge a debt that was declared nondischargeable in a case under the former Bankruptcy Act.20
There is no statutory bar to successive Chapter 13 discharges. The six-year limitation on successive discharges applicable in Chapter 7 cases under § 727(a)(8) does not apply to a Chapter 13 debtor who completes payments even under a composition plan.21
The principal limitation on the dischargeability of debt in Chapter 13 cases is the good-faith test in § 1325(a)(3). Applicable at confirmation, not at discharge,22 good faith forms the boundary of what Chapter 13 debtors can do with claims that would be nondischargeable under other chapters of the Code.23
1 11 U.S.C. § 1328(a).
2 See § 355.1 [ Waiver of Discharge ] § 161.1 Waiver of Discharge.
3 See § 349.1 [ Claims Not Provided for by the Plan or Disallowed under § 502 ] § 158.5 Claims Not Provided for by the Plan or Disallowed under § 502.
4 See also § 290.1 [ Untimely Filed Claims in Cases Filed after October 22, 1994 ] § 135.7 Untimely Filed Claims in Cases Filed after October 22, 1994.
5 See § 158.2 Student Loans and § 159.6 Student Loans: § 523(a)(8). See, e.g., Woods v. United Student Aid Funds, Inc. (In re Woods), 233 F.3d 324 (5th Cir. 2000) (Student loan is nondischargeable under § 1328(a) and § 523(a)(8) notwithstanding that United Student Aid Funds (USAF) filed a tardy proof of claim that was disallowed by the bankruptcy court.).
6 246 B.R. 597 (Bankr. E.D. Ark. 1999).
7 246 B.R. at 599–600.
8 See Handeen v. LeMaire (In re LeMaire), 883 F.2d 1373 (8th Cir. 1989); Memphis Bank & Trust Co. v. Whitman, 692 F.2d 427 (6th Cir. 1982); Ravenot v. Rimgale, 669 F.2d 426 (7th Cir. 1982); St. Joseph Wholesale Liquor Co. v. Butler (In re Butler), 74 B.R. 106 (W.D. Mo. 1985); In re DeSimone, 25 B.R. 728 (E.D. Pa. 1982); In re Riggleman, 76 B.R. 111 (Bankr. S.D. Ohio 1987); In re Cruz, 75 B.R. 56 (Bankr. D.P.R. 1987); In re Todd, 65 B.R. 249 (Bankr. N.D. Ill. 1986); In re Schyma, 68 B.R. 52 (Bankr. D. Minn. 1985); In re Sturgeon, 51 B.R. 82 (Bankr. S.D. Ind. 1985); Eastern Wrecker Sales, Inc. v. Parker, 49 B.R. 61 (Bankr. E.D. Va. 1985); Hartford Accident & Indem. Co. v. Rose, 37 B.R. 876 (Bankr. N.D. Ga. 1984).
11 See Pub. L. No. 101-508, 104 Stat. 1388 (Nov. 5, 1990); Pub. L. No. 101-581, 104 Stat. 2865 (Nov. 15, 1990); Pub. L. No. 101-647, 104 Stat. 4916 (Nov. 29, 1990).
12 11 U.S.C. § 1328(a)(3), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 302, 108 Stat. 4106 (1994). See § 348.1 [ Criminal Restitution and Criminal Fines ] § 158.4 Criminal Restitution and Criminal Fines.
13 See §§ 98.1 [ Plan Must Provide Full Payment ] § 73.1 Plan Must Provide Full Payment and 291.1 [ Treatment of Priority Claims ] § 136.1 Treatment of Priority Claims. See also Clavelle v. United States (In re Clavelle), 1994 U.S. Dist. LEXIS 18203 (W.D. La. Dec. 12, 1994), and No. 93-2059, 1994 WL 780695 (W.D. La. Dec. 8, 1994), discussed in § 343.1 [ Timing and Procedure for Discharge and Objecting to Discharge ] § 156.1 Timing and Procedure for Discharge and Objecting to Discharge.
14 See § 73.2 What Claims Are Priority Claims?, § 136.20 Alimony, Maintenance and Support in Cases Filed after October 22, 1994, § 136.21 Domestic Support Obligations after BAPCPA, § 158.1 Alimony, Maintenance or Support and § 159.5 Domestic Support Obligations: § 523(a)(5).
15 And at hardship discharge in a Chapter 13 case. See § 160.6 Exceptions to Hardship Discharge before BAPCPA and § 160.7 Exceptions to Hardship Discharge Added or Changed by BAPCPA.
16 See In re Zieg, 194 B.R. 469 (Bankr. D. Neb. 1996) (Tax claims for willfully omitted income and for the filing of fraudulent returns are nondischargeable in a Chapter 7 case under § 523(a)(1)(C) but are dischargeable in a Chapter 13 case at the completion of payments under the plan. Because of the exception in § 507(a)(8)(A)(iii), such claims are not entitled to priority in a Chapter 13 case.), aff’d, 206 B.R. 974 (D. Neb. 1997).
17 Memphis Bank & Trust Co. v. Whitman, 692 F.2d 427 (6th Cir. 1982). Accord Rakestraw v. Hood (In re Hood), 211 B.R. 334 (Bankr. W.D. Ark. 1997) (“Motion to Have Debt Declared Nondischargeable” alleging that postpetition dog bite was due to willful and malicious conduct by the debtor dismissed for failure to state a claim for relief.); Lunsford v. Vent (In re Vent), 188 B.R. 396 (Bankr. E.D. Ark. 1995) (Discharge in Chapter 13 case includes judgment based on assault with a firearm. Victim’s failure to object to conversion from Chapter 7 to Chapter 13 and failure to object to confirmation leaves the victim bound to accept “minuscule” distribution in satisfaction of the assault judgment.).
18 See, e.g., In re Schneider, 162 B.R. 199, 202 (Bankr. E.D. Wis. 1993) (“Certain debts, including governmental fines and penalties, which are non-dischargeable in chapter 7 become dischargeable in a successfully completed chapter 13 case.”); In re Ryan, 78 B.R. 175 (Bankr. E.D. Tenn. 1987) (Taxes that are excepted from discharge in a Chapter 7 case under § 523(a)(1) are dischargeable after completion of all payments if the taxes are provided for in the plan under § 1328(a). Tax debts for years prior to date of petition are dischargeable when the IRS fails to file a proof of claim, notwithstanding that the IRS was not scheduled as a creditor, when the IRS had actual notice of the Chapter 13 case and the plan provided for full payment of all priority claims.); In re Kazzaz, 62 B.R. 308 (Bankr. E.D. Va. 1986) (A debt for grand larceny of insurance monies that would be nondischargeable under § 523(a)(2) is dischargeable under § 1328(a) provided that the confirmation requirements of § 1325(a) are met and the plan is successfully completed.); In re Whitehead, 61 B.R. 397 (Bankr. D. Or. 1986) (Chapter 13 discharge after completion of payments includes discharge of claim determined to be nondischargeable in debtor’s prior Chapter 7 case, notwithstanding that Chapter 13 plan proposes no payment to holder of nondischargeable claim.); In re Tinneberg, 59 B.R. 634 (Bankr. E.D.N.Y. 1986) (Unscheduled debt declared nondischargeable in a Chapter 7 case pursuant to § 523(a)(3) may be dischargeable in a subsequent Chapter 13 case in which the creditor is listed.).
19 Blair v. Spada, 32 B.R. 105, 106 (Bankr. E.D. Cal. 1983).
20 Compare In re Chaffin, 816 F.2d 1070 (5th Cir. 1987) (Section 403 of the 1978 statute does not prohibit a Chapter 13 debtor in a Code case from discharging a debt that was declared nondischargeable in case under the 1898 Act), with In re Hochdorf, 25 B.R. 207 (Bankr. S.D.N.Y. 1982) (Debt declared nondischargeable in Act case cannot be discharged in Code case because of § 403(a) of 1978 statute.).
21 See In re Meltzer, 11 B.R. 624 (E.D.N.Y. 1981); Cornett v. Galt (In re Galt), 70 B.R. 57 (Bankr. S.D. Ohio 1987); In re Ponteri, 31 B.R. 859 (Bankr. D.N.J. 1983).
22 Bad faith is also recognized by many courts as a cause for dismissal of a Chapter 13 case. See § 334.1 [ Cause for Dismissal, Including Bad-Faith, Multiple and Abusive Filings ] § 152.4 Cause for Dismissal, Including Bad-Faith, Multiple and Abusive Filings.
23 See discussion beginning at § 106.1 In General.